Grant Anticipation Revenue Vehicle, or GARVEE, is a type of bond

Bond (finance)

In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...

 or similar financing method issued by a state or state infrastructure bank under the guidelines of the National Highway System Designation Act of 1995, eventually made permanent in section 122 of Title 23 of the United States Code

Title 23 of the United States Code

Title 23 of the United States Code outlines the role of highways in the United States Code.—Federal-Aid Highways—Other Highways—General Provisions—Highway Safety—Research And Technology-External links:*, via United States Government Printing Office...

. States must repay the bonds using federal funds expected to be received in the future. Some financing under this plan is referred to using the term Grant Anticipation Note (GAN).

Section 122 states "an eligible debt financing instrument is a bond, note, certificate, mortgage, lease, or other debt financing instrument issued by a State or political subdivision of a State or a public authority, the proceeds of which are used to fund a project eligible for assistance under Title 23."

GARVEE bonds may be used for major projects receiving federal funding. They do not guarantee that the federal government will provide the expected financing, and they are not guaranteed by the federal government. Details of projects must be sent to the appropriate Federal Highway Administration

Federal Highway Administration

The Federal Highway Administration is a division of the United States Department of Transportation that specializes in highway transportation. The agency's major activities are grouped into two "programs," the Federal-aid Highway Program and the Federal Lands Highway Program...

 (FHWA) division office to make sure the project follows federal rules for eligibility. The FHWA approves only the projects, not the financing method. The state may also elect to use methods other than federal funding for repayment, and it may receive federal funds through a trustee

Trustee

Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...

 or depository.

Eligible costs for projects may include interest

Interest

Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

, retirement of principal, costs for issuing bonds, and other incidental costs which must be approved. Bond proceeds not used for projects may be used to pay principal and interest, but they may not be reimbursed. The FHWA may also repay a debt service reserve fund used to pay bondholders when federal funds come later than needed. Reimbursement of a surety provider

Surety

A surety or guarantee, in finance, is a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults...

for interest and principal is also eligible; interest and penalties associated with payments to surety providers are not.